Good day, ladies and gentlemen, and welcome to Second Quarter DiamondRock Hospitality Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Sean Kensil, Director of Finance. You may begin, sir..

Thank you, Nicole. Good morning, everyone, and welcome to DiamondRock’s second quarter 2018 earnings call and webcast. Before we begin, I would like to remind participants that many of our comments today are considered forward-looking statements under federal securities law, and may not be historical facts. These statements are subject to risks and uncertainties as described in the company’s SEC filings. In addition, as management discusses certain non-GAAP financial measures, it may be helpful to review the reconciliations to GAAP set forth in our earnings press release. This morning, Mark Brugger, our President and Chief Executive Officer, will provide a brief overview of our second quarter results as well as discuss the company’s outlook for 2018. Jay Johnson our Chief Financial Officer will provide greater detail on our second quarter performance and discuss the balance sheet. With that, I’m pleased to turn the call over to Mark.

Thanks. Good morning, everyone, and thank you for joining us on DiamondRock’s second quarter earnings call. I’ll start by providing a few brief remarks on the current economic environment, then discuss our second quarter results followed by a general company update. Jay will provide some additional color on our results and balance sheet. We will conclude with prepared remarks with our outlook for the remainder of 2018. Consistent with our more positive outlook on the last quarterly call, we continue to see the U.S. economy growing at a healthy pace. In the second quarter, GDP grew at an annualized rate of 4.1%, the best quarterly growth in years. Importantly, GDP growth was bolstered by several of the economic indicators that are closely associated with lodging demand, including strengthening consumer spending and non-residential business investment. Lodging fundamentals accelerated in the second quarter, with the top 25 markets growing RevPAR 3.9%. In fact, we’ve now had 100 consecutive months of positive RevPAR growth. The supply demand balance continues to be favorable with demand outpacing supply by over 100 basis points. Overall, macroeconomic and lodging fundamentals suggest that this cycle has room to run. Turning to DiamondRock’s second quarter results, we are pleased with our RevPAR growth of 2%. RevPAR met the heightened expectations that we articulated on our last call overcoming the impact of one-time items at our Vail Resorts and Boston Westin. Displacement at the Vail Resorts, which is undergoing a major value enhancing renovation during the second quarter reduced RevPAR by approximately 50 basis points. Disruption at the Boston Westin from the Starwood/Marriott merger issues reduced RevPAR by another 130 basis points. Excluding the Boston Westin and Vail Resorts, portfolio RevPAR increased 3.9%, which is in line with the accelerating trends in the broader U.S. and top 25 markets. We…

Thanks, Mark. Before I discuss our first quarter results, I would like to remind everyone that comparable RevPAR, hotel adjusted EBITDA margin, another portfolio metrics, including L’Auberge de Sedona, Orchards Inn, The Landing Resort & Spa and Palomar Phoenix while excluding Frenchman’s Reef and Havana Cabana, Key West for all periods presented. Overall, we were pleased with our results for the quarter. Excluding the Vail Marriott and Boston Westin, our portfolio and RevPAR grew 3.9% driven by a 4.5% increase in rate and 50 basis point decline in occupancy. April started out the quarter strong with RevPAR growth of 4.1% benefiting from the Easter shift into March. May results were approximately flat, as expected, while jewelry accelerated with RevPAR growth of 2.2%. F&B results were much better in the second quarter, with revenue and profit both up around 2%, while margins also improved by 13 basis points. Although the Chicago Marriott’s group revenue increased 8%, it was a tough comp with several unique non-repeat banquet events in 2017 that weighed on overall F&B results. Excluding Chicago Marriot, F&B margins were up an impressive 120 basis points, with profit up nearly 7%. Cost containment remains a top priority for the company. Although slightly better than our prior forecast, second quarter comparable hotel expenses were up 3.3% from the prior year. Expenses were driven primarily by increases in property taxes and insurance premiums, which impacted margins 70 basis points. Excluding property tax, insurance and some smaller non-repeating items, expenses were up 2.2% from the prior year. The success of our asset management team was clearly evident this quarter. The team is focused and largest expense opportunities sit around in three areas: labor efficiency, energy programs and food costs. In the second quarter, productivity on our hotels improved 60 basis points, while wage…

Thanks, Jay. Yesterday, we reaffirmed our guidance for full-year RevPAR growth of 2% at the midpoint. As you will recall, on our last call, we raised DiamondRock’s full-year RevPAR guidance by a full 100 basis point. Our current guidance does include the impact from the Marriott/Starwood integration, we estimate shaves up about 50 basis points on full-year RevPAR growth. Our guidance for full-year EBITDA and FFO remains $254 million to $263 million of adjusted EBITDA and $205 million to $212 million of adjusted FFO. As mentioned in our recent 8-K, we are updating our FFO per share range to reflect our recent ATM issuance. The updated guidance is for $0.99 to $1.03 per share. Looking towards the second-half of the year, we expect lodging demand to remain robust with industry RevPAR growth in the range of 3% in the third quarter. DiamondRock’s third quarter results will be impacted by about 225 basis points from a combination of repositioning renovations and the timing of citywide calendars. However, we expect our fourth quarter to be the strongest of the year with RevPAR growth reaccelerating to over 3% with better citywide calendars, favorable comps to last year’s natural disasters and tailwinds for recent renovations. To wrap up, DiamondRock is well positioned as we move forward with the high-quality portfolio that will be largely renovated by the end of this year, a number of unique internal growth catalyst still to be tapped like the repositioning at Vail, The Rex San Francisco and Frenchman’s to drive performance and the company has over $400 million in dry powder to be opportunistic in pursuing acquisitions. With that, we would now be happy to answer any questions that you may.

Thank you. [Operator Instructions] And our first question comes from Austin Wurschmidt from KeyBanc Capital Markets. Your line is now open.

Hi, good morning. I know you guys have talked about and appreciate some of the data points on the positive signals we’ve seen in the economy, but some certainly expect this could be short-lived. And I guess, with the move towards building a more of a luxury resort-oriented portfolio, it’s certainly building a differentiated portfolio. But I’m curious based on your research, how do you see the segment, or how does it perform later cycle? And maybe how are you accounting for this risk as you continue to pursue additional acquisitions in the segment?

It’s a great question. It’s Mark. So our research and our experience has been – this is actually on a risk-adjusted basis, the best allocation of capital at this point in time. If we look back historically over the last downturn, the resort portfolio that we had outperformed the urban portfolio. So in a downturn, it seems like this is more resilient. As we move forward and we’re allocating capital and get our current resorts or if you had an opportunity to look at our pipeline, there are much more supply constrained markets, where it may be either there’s a moratorium on building like market like Key West or Lake Tahoe, or there are natural barriers like a Sedona, where it’s surrounded by national parks, which no one keeps our hotels in. So we think if you look forward to allocating capital now in an external growth front, that’s probably your best risk-adjusted return. We also like the general demand outperformance of experienced resorts. We do think that segment probably will be more resilient of the next three to five years and outperform the national average.

Great. Thanks for the thoughts there. And then just curious of The Landing Resorts, hotel has been a little soft here before. And I’m just curious on how that stacked up relative to your underwriting? And maybe when should we expect to see some improvements there either the margin side or from a RevPAR growth perspective?

Sure. So we remain really excited about The Landing and all the value enhancements opportunities ahead. I would tell you, don’t be fooled by the RevPAR change in Q2, it is somewhat a loss of small numbers. For instance, if we sold only four more rooms every night in the quarter, RevPAR would have been up 4% versus down 4%. So it’s just – it’s very sensitive given its size. We have a great plan here. We’ve only owned it for about 120 days. We’re executing. We brought in the same manager that we did in Sedona at we’re copying that playbook. As you know, the Sedona acquisitions last year that we were able to increase RevPAR 19% and implementing a lot of the things that were implementing currently at The Landing. So we expect Landing in the back-half of this year that mid single-digit RevPAR growth as our initiatives start to take hold. And remember, none of this includes the real nugget of NAV accretion here, which is building the 20 incremental entitled rooms at the resort.

Yes. I was going to follow-up with that. What’s kind of a timeframe, do you have anything in mind at this point on the build out?

Yes. So it will probably take us about a year to get through all the processing. And then we’ll build on the following year would be the kind of current thinking of the company.

That’s helpful. And then more broadly for the portfolio, just curious how you’re thinking about directionally capital expenditures in 2019?

We’re – we haven’t even started. We’re in the very preliminary discussions with operators about our 2019 forecast, but it will probably be something similar to this year. Although we won’t have hopefully the same year-over-year headwinds we’re having with the property insurance and real estate taxes.

Great. I appreciate the time. Thanks, Mark.

Thank you. And our next question comes from Anthony Powell from Barclays. Your line is now open.

Hi, good morning, everyone. Just question on the Westin Boston. Is the sales force, I guess, staff and their approach there hasn’t been fixed to your satisfaction? And what is Marriot’s response been to your concerns, or how did they react to your – in the discussions with you?

Yes. So I can tell you, it’s a top priority for DiamondRock. We’ve had discussions at the highest levels of organization. Tom spent probably every day interacting with Marriott on how they’re addressing it. They do have a detailed action plan. I’ll let Tom add to it.

Hi, Anthony, this is Tom. We – Marriott’s been very responsive. We’ve added additional resources and we’ve obviously the – everyone was rehired April 1. And so there – we have – we’ve structured it similar to how we’re doing the Marriot Chicago, which has been obviously very successful. So we’ll have people at the property level. We’ve retained our own revenue manager, not clustered, and then we’re still dealing with the global sales, national sales and cluster sales organization and the way that structured. So it’s a work in progress, but they’ve been very supportive and open to listening to our suggestions and we expected this, we’re going to have some positive wins here as we look forward.

Anthony, I think, the best thing to think about this is, integrations are tough. It’s obviously a major acquisition by them. The best analogy is probably the Gaylord when they took over the operations of those. There are hiccups when you do this kind of large integration, but Marriott almost always gets it right. And the power of that system and the expertise of the executives and the sales force there over an extended period of time, it’s hard to come.

Got it. Thanks. And then moving on to Chicago, the performance here has been pretty strong. That said their market tends have on years and off years. So how does a Chicago calendar look in 2019?

So we’re – it’s good this year, but we’re going to significantly outperform the market. We have been outperforming the market. We’ll benefit in 2019 from a comparison of having our meeting space out in the Chicago Marriott for the first couple of months of 2018. So that that will help. 2019 is down a little bit versus 2018. So the citywide, we’ll have to work its way – we’ll have to work our way through that in Chicago. But already 2020 looks like a very good year. So we’re setting up for what we think will be a reacceleration in 2020.

This is Tom, Anthony. The other piece is that, we’ve mentioned in the past is choose Chicago and having the marketing to leisure guests, making sure that that Chicago is not just the city that’s thought of as a convention city but all the other features retail restaurants. The leisure demand into Chicago has been outstanding and we believe that’s obviously going to continue international travel into Chicago is up. And we have the two best locations in the market. We’re at the river and on Michigan. So, we feel pretty positive about the one the group patterns next year, our new meeting space. Our prospects are strong and leisure bodes well. So I think – and then, I think that we’re – Chicago is a very positive story for us looking forward.

Maybe just one more for me. You have been very focused on the resort acquisitions, which is very different to some of the peers. We think your peers are maybe missing about in this space. What have made – how is your underwriting may be different or why do you have a conviction on space than others?

I’d hate to speak for our peers. You just ask them. I think that I really hats off to Troy on uncovering a lot of unique off-market deals. Our team works very hard. We got a very good database of these kind of one-off resorts in the Phoenix markets like Sedona and Troy’s teams really done I mean some of these stories behind these acquisitions are really quite remarkable and sometimes quirky. But I think, one of the things that we do really well and particularly again, I’ll give credit to Troy is uncovering these deals, which are hard to do. It’s kind of become a specialty. And the more we do the better we get at it and the more we have the reputation as the go-to company that you want to be dealing with when you have one of these kind of resorts. So I think it builds on itself a little bit.

Okay. All right. Thanks a lot.

Thank you. And our next question comes from Michael Bellisario from Baird. Your line is now open.

Good morning, everyone.

Good morning.

Just wanted to go back to Vail and Boston, can you maybe give us a sense of the disruption that you experienced in the quarter versus your expectations? And then how those two hotels are affecting for your guidance? Any changes that you see in the back-half of the year from those two relative to expectations 90 days ago?

So I would say, the Vail is right on expectations that we had at the beginning of the year. So it’s pretty much playing out as we thought it would the rooms out of service and the meeting space out of service. So we have that that buttoned up. Boston is playing out the same as we thought it would on the last earnings call. But it was below our expectations if you asked me on January 31, January 1, it’s below those expectations. But we had a pretty well forecasted for Q2 and for the back-half of the year. Vail rooms renovation will finish up in early September and then be able to get back on track before high season. The Boston Westin, as Jay said in the prepared remarks, is a little less that in Q3 and get substantially better in Q4. Hopefully, we’ll set up to perform at least to the market levels in 2019.

And did I hear you correctly that, that one hotel Boston is 50 basis points of RevPAR impact for the full-year. How do you think about it?

No, it’s a 130 for the quarter, yes, 50 for the full-year.

Got it. And then just maybe high level back to he kind of acquisition and underwriting topic. How are you thinking about the out years differently today than maybe 180 days ago or even 90 days ago kind of as you’re doing your five-year model and then how are you adjusting expenses assumptions any differently today?

Well, then – the 90 or 180 days ago, I would say the – so we run different sensitivities. When we have a discussion, we’ll review with our executive team and we’ll review with the Board. We have sensitivities on kind of a baseline, an upside scenario and the downside scenario. I would say those scenarios are relatively the same. The difference versus three or six months ago, as I think, we have more confidence that we’re going to be in these cases or upside scenario. And there’s probably less risk that the downside scenario will come to fruition. On the expense side, we’re watching carefully. We try to – we try put it in there correctly. The variable, I think is what the risk is off wages over the coming years and that really depends on what markets we’re in. So in New York, for instance, there’s a long-term union agreement locking in wage – we’re at about 2.6% over the coming five years as a CAGR, so that one we feel good about. We do have to think about in this resort markets about how we – how we’re going to staffed and the ability to control cost over time. So each one is a different story. As you know, in a couple of major markets like San Francisco, the union agreements are coming up. So you have to be careful about making assumptions about what the new union agreements will look like and what wage benefit increases will be.

Got it. So it sounds like the three different buckets, your underlying assumptions in them haven’t changed, but your assigned probabilities, that’s really the only change, is it fair?

That’s a fair assessment.

Got it. That’s helpful. That’s all for me. Thank you.

Thank you. And our next question comes from Bill Crow from Raymond James. Your line is now open.

Great. Thanks. Good morning, Mark and Jay. What – Mark, what is the cost inflation differential between resorts and typical urban properties?

It’s a great question without a specific answer, but each one is different. I would say the advantage of many of the resort markets that we’re in is that they are non-union markets and often where the most important employer in town and we’re often the best employer, some of the highest-rated jobs in number of those markets. And we can get productivity gains with new labor systems, because again, we’re not fighting against workflows and fixed labor contracts. In our portfolio, I’d have to go back and back test our particular – our portfolio, but my guess is, if I went back into the analysis, it’s going to be less than certainly the major markets that are – where wages and benefits are controlled by the union increases.

Okay. You prepared a good detail on Chicago and indicated citywides are down next year. I’m just wondering if you could quickly run through some of your major markets comparing the citywides this year to next year?

Tom has got that – see in front of them.

Okay.

Show them…

Sure. So, obviously everyone’s well reported on San Francisco and how strong San Francisco is doing next year San Francisco is up. And most of the other major cities are slightly down next year. When you look at Boston, Chicago, Denver, Fort Worth, Fort Worth’s up – Fort Worth’s down slightly. Many of the major citywide markets are down, but I think what we’re seeing is, in some of our markets the patterns are positive like the first and second quarter are good in the back-half of the year is down a lot of – and talking to some of the different cities we found that they believe obviously that it’s really about peaks. On the citywide, and so and were heavily focused on self-contained growth in all of our markets to make sure we inflate ourselves from citywide pay. So, it varies city to city. San Diego is slightly down next year. And Salt Lake City obviously slightly down, but are self-contained in Salt Lake City is up. So, it varies, but for the most part San Francisco is pretty positive and everybody else seems to be flat or down slightly down next year.

And I would say New York is not really relevant it’s not a city wide. So, that’s going to be really interesting to me, and Chicago is down a little but 2020 looks really good where we are going to benefit with Glen continuing to ramp and the renovation comp in Chicago, so hopefully will do – we should gain on the market there Boston is down a couple of citywides, but the patterns better for next year. So that should help. It is stronger and the weakest periods of year-over-year that that should be okay, but down a little bit. And then the resort markets that’s going to be the strength for us and we have focused on the city wide. We are implementing in number of these markets in-house group strategies. As Tom was kind of alluding to on Chicago, we have good – the solution when it’s not a good citywide as you try to get as many small mid-size groups and really group up with your own business. but that’s been the strategy we’ve already started implementing in number of these markets.

I appreciate that I get one more question, which is just to remind us or maybe you haven’t articulated it yet. What are the major kind of disruptive capital projects that we’re going to be talking about next year and that are impacting results. So, if there are any. And then what is the delta as first disruption expectations from 2018 to 2019?

So, we’re in the process right now. Actually, we just have already in this week we’re talking about some major innovations. We would expect less disruption in 2019 and 2018 by couple of million dollars and less disruptive projects generally in 2019 versus 2018.

So, it should be kind of back to a normalized year.

Right.

Is that [indiscernible] agreement okay. That’s it for me. I appreciate it.

Thank you. And our next question comes from Chris Woronka from Deutsche Bank. Your line is now open.

Hi, good morning guys what if it – if we could revisit the group out of room spend because we’ve heard that as a source of strength from you guys and some others. Is that more a function of pricing or volume or both and is it sustainable or is there some kind of one time I guess ramp up this year?

I guess, I’ll just jump in and let Tom kind of get in the granularity, but in this quarter industry we saw group leading the way as a one the strongest segment. So, when group is stronger you’re going to get more out of the room than it has been a pretty good trend for us we’re obviously a fairly small portfolio. So, ours will go up and that won’t necessarily correspond every quarter with the industry average. But the anecdotal evidence, again from a properties has been positive on the outer room spend, but quarter-to-quarter it has a little bit on type of groups that we’re booking.

Yes, this is Tom, for the second quarter rev 2.3% on with our banquet contribution. And there’s heavy folks and we have to imagine side to really start paying attention as with regard to incremental spend looking at banquet pricing, looking at in the all the incremental revenue opportunities that could be driven audiovisual other room rental making sure that attrition caused the right sliding scale exists in with regards to pick up. So, that is low hanging fruit that sometimes gets forgotten. And so, the asset management team is heavily focused on that that’s your second most profitable business coming into the hotel. So, there’s a heavy focus to it and metrics against it.

Okay very good and then just on kind of the Marriott Group the integration issue on the western. I think you mentioned 50 bps impact RevPAR this year. I mean should we assume that that just reverses next year or is there – are there are cases where that where a competitor took multiple years of business as a result of this?

No, I don’t think there’s cases where multiple years of business, but we don’t know about 2019. I mean we’re seeing that our pace is better than a number of our peers in Boston for next year. So, we would anticipate that it’s going to be fine next year. But I think it will be too early for us to say, we think we’re going to outperform the market, because we are – it’s going to be 100% better by next year, because there’s kind of loss in the year for next year business that will take a while to put that on the books.

Okay, great. And then just on the new leisure comment, should we assume that, I know you mentioned that the room rates were down in the quarter, should we assume that’s all function of kind of intentional remix and not any kind of – should we not think about as the leisure segment being maybe tapped out. How do you guys look at it?

Now on the leisure remained strong for us we’ve stick there out of our portfolio we’re up about 3.5% in RevPAR. Our asset management group is very focused on maximizing obviously the rate which has got the better flow. Tom has been implementing a number of strategy about room types and trying to upsell and create new rate categories, which are allowing us to push the rate. And that that could that will continue to be our focus as we move forward. But we feel good about the leisure demand we feel good about the leisure customer and we have a lot of ideas in asset management initiatives that kind of continue to push the rate on the resort’s.

Okay.

At the Easter shift, right. Easter in March 1 versus April is a big driver of rooms. And some of that noise was in Fort Lauderdale for the quarter was up in group and probably did display some leisure. So that that was positive, because the spend was good. And then we the Easter shift, obviously Easter drives a lot of leisure business. And so that’s a piece of it as well.

Okay, very good. Thanks guys.

Thank you. And the next question comes from Jeff Donnelly from Wells Fargo. Your line is now open.

Yes, good morning guys and Mark you’re using the analogy or the comparison to the Gaylord integration into Marriott. That ended up lasting a few quarters. I guess. I’m just Do you think there’s a chance that the reintegration issues in Boston could actually spill over into 2019, and even in some reduced way?

Yes, I mean, I know it is not a perfect analogy because here it’s – they’re taking on the whole system. I mean we’re looking at our forecast and we’re looking at our numbers it looks less bad in Q3, but still not great. And then it looks like it’s getting more on back to track in Q4. But in the quarter for next year, we lost, we just lost some of those groups right when they weren’t selling the hotel effectively and we’ll have to climb out of that hole little bit as we move into 2019. So, I think we get back on track just is that slope of that curve is still uncertain. But it feels like they got the right sales people in place. We’ve added some sales folks on property now pull through the business, the action plan, our team is working closely with their team. It seems like all the pieces are in place now, it’s just a matter of executing on the strategy and getting the groups into the hotel.

Is there any – this might sound laughable, but is there any ever recourse you as an owner have against the other brand in these situations considering that much of the issue ultimately seems to be caused by them?

Not really. I mean, trying to prove that claim would be tougher. Remember, what we’re really looking for them is not to make it whole on the lost profits here, but it’s to take the hotel ultimately to a highest possible stabilized NOI. I’d much rather say, we’re couping be a little bit of money get them to take this to a new level of profitability, and that – that’s our goal.

And just so I’m clear, I mean, it’s really kind of an issue of assets that are formally Starwood managed, because I’m guessing that you didn’t see similar issues in U.S. and San Diego?

Yes. So – well, it’s – this is our only Starwood managed property. This is really where you’re going to see the most impact. But for franchise, you’re not in there. You’re not seeing as much effective cost of sales.. There will be some impact, but it’s not as dramatic.

And then switching gears, I know, I heard in your prepared remarks. But on Frenchman’s, do you have a better sense of whether you’ve been leaning towards rebuilding versus that you’re selling at this point? And I guess, if you do decide to rebuild, do you have an estimate how long that might take?

So it’s an easier question for us, which is the length of time to rebuild. So the goal we’ll try to get it reopened if possible for the high season in 2020. So that would be the goal for rebuild. And we have timelines, where in the ballpark depending exactly how the construction schedule goes. We have a meeting schedule with insurers later this month, so there’s a lot of sense to these around that discussion that meeting. But we have additional conversations going on with the government about our partnership there, as well as talking to brands about financial participation. So there’s a lot of moving pieces. I’d say, design book is great that we have and the enhancements that we have and the property, I think, will relate to future effect. But it think it’s – where too sense of a juncture at this moment to elaborate too much on this call.

Okay. Understood. Thanks, guys.

Thank you. And our next question comes from Lukas Hartwich from Green Street Advisors. Your line is now open.

Hey, guys, this is actually David on for Lukas. I was wondering can you comment on how the union buyouts at the Lex are going? It’s looking like the full-year severance guidance came down a bit. I’m just wondering how we should read that?

Sure. I mean, the way the program works is you need to offer to all of the workers in the various departments and you don’t know what the actual take rate would be until they elect the option. It met our original expectations. We had a little bit higher and there we’re still trying to have some discussions of kind of a win-win on a couple of other smaller groups within the hotel. We did spend about $10 million on severance so far. We think that will increase profits in the hotel by about $1 million in back-half of this year and about $2 million in 2019. So it’s been a smart deal for us and we think it’s a win for the employees at our hotel as well.

Okay. And then just kind of switching gears on the Havana Cabana hotel you guys just opened. I’m just curious how that’s being received in the market? And then how long does it typically take kind of the full rebranding and refurbishing of the hotel before it returns to a stabilized level?

Yes. So it’s totally transformed from the project it was before. It’s 15 points higher spaces rinks, ranking, I guess, would be the right word to say. In TripAdvisor – if you go to TripAdvisor and see the feedbacks are very positive. We would expect it to be significantly ramped by high seasons Q1 of next year. But at the balance of this year, one of the reasons it was kind of great to open it in a softer time of the year is, we’ll have time to ramp it up before the highest rate of business comes in January, February.

That’s it for me. Thanks.

Thank you. And our next question comes from Stephen Grambling from Goldman Sachs. Your line is now open.

Hey, thanks. Maybe this has been addressed a little bit, but how is the competition for the resort assets that you’re looking at evolved relative to maybe some of the other segments of the space as it relates to – for buyers in the bid process? And who typically is that competing better?

So, Jay, you want to take that?

Sure. Well, I would say, look, we’ve really been focused on off-market deals. I would like think, we had less competition, because these weren’t public auctions. My concern would be as we have success in this area, the more sort of a jump on to that bandwagon. So we’re always concerned about competition. But I think if we – the more we can source off-market, the more we can mitigate a lot of competition that run the price up.

And then, I guess, why do you suppose more of these types of deals or situations are available in the market now?

Weil, I don’t necessarily think there are more available. We’ve been more focused on it and trying to identify them, but I don’t necessarily think there are more out there…

Okay, that’s helpful.

….that that we haven’t seen in the past.

Got it. And then, I guess, perhaps I missed it. So maybe if you can just contextualize why you feel acquisitions are a better use of capital at this point relative to ROI, or other areas of distribution?

I’ll take that one. So we’re doing internal and external growth. We’re spending over $100 million on projects like the Rex transformation in San Francisco or the Vail upgrade. So we are pursuing the kind of high ROI projects within the portfolio. External growth, I mean, I think, the 2017 acquisition speak for themselves about two hotels. They were trailing 15 times EBITDA multiple. Based on our current forecast, they’re about 9.5 times EBITDA multiple on our total investment for 2018. So if we can find deals like that, it’s pretty obvious that they create a lot of value for our shareholders. Now they’re not all going to be that good, that one certainly created a bunch of value for shareholders.

Great. Thanks so much.

Yes.

Thank you. And I’m showing no further questions at this time. I would now like to turn the call back to Mark Brugger, Chief Executive Officer, for any further remarks.

Thank you, Nicole. To everyone on this call, we appreciate your continued interest in DiamondRock and look forward to updating you on the next quarterly call.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes today’s program. You may all disconnect. Everyone, have a great day.